S.D. Home Prices Dip; Sales Remain Anemic : Real estate: Builders blame recession, loss of defense jobs as lower interest rates fail to spur sales.
Prices of new homes and condos sold in San Diego County subdivisions fell over the first three months of this year, as did mortgage interest rates, but apparently not enough to bring back buyers who generally remain concerned about the economy in general and for their jobs in particular.
The average price of a detached or single-family house sold over the three months ended March 31 was $253,440, down 4.3% from the $264,775 average price over first quarter 1991. The average price of attached housing--townhouses, condominiums and the like----was $154,259, an 8.4% decline from last year.
Market activity remains anemic. A total of 1,810 new units were sold over the three months, a 10% decrease from the 2,013 units sold from January to March 1991, according to Market Profiles of San Diego, a market research firm.
Thus the three--year depression in San Diego County’s housing industry continues, a period during which average prices in the county have fallen 15% to 20%, said Bill Fontana, a partner in San Diego--based Westana Builders/Developers.
Some builders reported an uptick in buyer traffic through their subdivisions in recent weeks, attracted by lower mortgage rates and a new crop of North County single-family developments priced at under $160,000 each.
But Fontana said he and others in his industry remain pessimistic, pointing to problems in the economy, particularly the long-term effect of the downturn of the Southern California’s defense industry.
“The lack of defense in our economy is going to have an impact,” Fontana said. “People are scared.”
The price drop has hit higher-priced developments particularly hard, said Peter Reeb of the Meyers Group, a San Diego--based market research and management consulting firm. That’s because buyers of higher-priced or “move-up” housing often must first sell cheaper, existing houses that probably have lost value over the last two or three years, leaving insufficient equity to qualify them for a “move-up” purchase, Reeb said.
Interest rates of 30-year mortgages have fallen over the last three weeks to 8.625% or 8.75% from 9%, said Jim Witherow, managing director of mortgage banking at HomeFed Bank. And, although the mortgage rate dip has generated more interest in mortgage loans over the first quarter than during the previous three months, Witherow said loan demand remains low relative to past years.
The low demand and the financial straits in which many builders find themselves, have caused some builders of distressed properties to cut prices in bank-ordered sales, sources said, particularly along the California 78 corridor in North County.
Kaufman & Broad recently bought 168 unfinished lots from a distressed developer in Vista at a price of about $25,000 per lot, or roughly half the price it would have paid three years ago, sources said, when San Diego’s new housing market was in an upward price spiral fueled in large part by speculative investors.
Prices of completed units probably would have fallen more over the past year had new construction not slowed to a virtual standstill, allowing inventory to decline to levels that match the low demand, said Reeb of Meyers Group.
As of March 31, there were 3,127 completed houses and condominiums available for sale in San Diego County subdivisions, below the 4,000-unit inventory of new housing that Reeb said was typical for much of the 1980s. Still, the inventory of completed unsold housing is still far above the 1,549-unit level of inventory in 1989, the lowest over the past decade.
The low inventory is as much a function of scarcity of financing as low buyer demand, said Sherm Harmer, division manager of California Pacific Homes, which recently changed its name from the Donald L. Bren Co. Harmer is also president of the Homebuilders Council of the local Building Industry Assn. trade group.
The unavailability of bank loans has made the home-building business tougher for all but the largest companies, Harmer said, adding that the top 10 home builders in the county now account for 50% of total sales, up from 25% of total sales two years ago.
“The bad news is builders are not making a lot of money, and the worst news is that there is no encore. There is a lack of construction financing for building new projects. It’s nonexistent,” Harmer said.
Harmer said the scarcity of financing has caused many builders to turn to non-traditional sources for capital, including Wall Street. The parent of Presley of San Diego home-building company raised money through a public stock offering recently, and McMillin Development of San Diego plans a similar stock offering.
